A-to-Z Index

3005 - Internal Controls

Effective Date: July 1, 2009


Table of Contents:

   .100 General
   .200 Policy
   .300 Control Responsibilities
     .310 Assistant Vice President for Finance
     .320 Director of Audit and Management Services
     .330 Department Heads
   .400 Procedures
     .410 Office of Finance
     .420 Department Heads
     .430 Audit and Management Services

.100 General

Internal controls are management procedures designed to ensure efficiency and effectiveness in operations, to improve management decision making, to protect resources, to ensure maintenance and reporting of reliable information and execution of operations consistent with established management policy. Internal controls, therefore, are an integral part of the mechanisms used by management to regulate and guide operations.

Internal controls are distinguished as accounting and administrative controls. Accounting controls are necessary to ensure that activities associated with authorizing, processing, recording, and reporting financial transactions are properly controlled and that the information resulting from these activities is reliable and useful. Administrative controls are necessary to ensure that all resources, including personnel, are properly obtained, maintained, and used; that decisions regarding the expenditure of funds are made based on reliable information; and that budgets are properly developed and monitored to ensure consistency between planned and actual expenditures.

Internal controls do not constitute or require separate systems within the University. They are and should be an integral part of each system James Madison University uses to operate its programs and functions.

.200 Policy

It is the established policy of James Madison University to require the maintenance of adequate internal controls. University Policy No. 1108, "Internal Controls", outlines the University's Internal Control Program.

.300 Control Responsibilities

.310 Assistant Vice President for Finance

1.  Recommends internal control policy.
2.  Develops and publishes procedures.
3.  Issues the statement concerning internal control that accompany the University's financial statements.
4.  Assists departments and activities in designing procedures that will provide adequate internal controls.
5.  Conducts an annual review of internal controls at the department level. Refers potential risk areas to the Director of Audit and Management Services.

.320 Director of Audit and Management Review

1.  Assists departments and activities in designing procedures that will provide adequate internal controls.
2.  Reviews the system of internal controls about audits performed and recommends improvements.
3.  Includes potential risk areas referred by the Assistant Vice President for Finance in the annual risk assessment process used to develop the annual audit plan, as appropriate.

.330 Department Heads

1.  Exercises primary responsibility for maintaining adequate internal controls.
2.  Cooperates with the Office of Finance to conduct the annual internal control reviews.
3.  Complies with internal and external audit recommendations related to their area. Enlists the assistance of the Assistant Vice President of Finance and/or Director of Audit and Management Services when developing new or modified systems.

.400 Procedures

.410 Office of Finance

1.  Sends Internal Control Questionnaires to selected department heads as necessary.
2.  Reviews the responses to the questionnaires in order to determine areas of weakness and, if applicable, communicates these findings to the applicable department head and the director of audit and management services.
3.  Advises department heads on how to incorporate internal controls into new and revised systems.
4.  Ensures that all financial systems have been reviewed by external auditors, internal auditors or by management at least every four- (4) years.
5.  Includes a general statement regarding internal controls with the University's Annual Financial Report.

.420 Department Heads

1.  Completes the Internal Control Questionnaires expeditiously and returns them to the Office of Finance.

.430 Audit and Management Services

1.  Performs a periodic comprehensive internal audit to review departmental internal controls and the effective and efficient use of available resources. (Departments referred by the Office of Finance will be included in the annual audit plan at the discretion of the Board of Visitor's Audit Committee. Comments relating to internal control weaknesses in these areas will be included in Audit and Management Services reports).
2.  Reviews quarterly the Internal Audit Reports, the External Auditors' Management comments, and the Progress Reports to resolve deficiencies noted by each. (This review is performed by the Director of Audit and Management Services with the Audit Committee of the Board of Visitors).
3.  Advises department heads on how to incorporate internal controls into new and revised systems.